The US dollar rose in value yesterday, after the International Monetary Fund (IMF) cut its growth forecasts for the global economy by 0.2% for 2018 and 2019. The US dollar is currently benefiting from its status as a safe haven currency, and the trade war with China appears to be impacting China far more than the US so far.

Currency Pair		% Change in 1 month	Difference on £200,000
GBP	USD	0.75%	$1970.25

The GBPUSD pairing is likely to be influenced by Brexit in the up and coming week, however there will be opportunities from both sides for clients with a requirement. After the Bank Holiday in America on Friday, US markets are patiently waiting to see if the US equity market will recover after the slump yesterday with key speeches this week from Vice Chair Clarida tomorrow and the Fed Chair Powell on Thursday. Speeches generally have the ability to influence the currency in question and with question marks surrounding US fiscal policy and whether the interest rate plan will continue in the US at such an aggressive path next year. With GBP under pressure from domestic political struggles, clients buying USD with GBP may find it slightly cheaper to do so around these speeches.

This week China has announced that they will cut the amount of funds required to be held on account by Chinese banks in an attempt to encourage growth in the world’s second largest economy. The Chinese stock markets have also seen an almost 20% correction this year, demonstrating the concerns over slowing growth, and along with the trade war between the US and China continuing I think fears of a global slowdown will continue to result in a stronger US dollar.

Over the past quarter we’ve seen the GBP/USD (cable) rate remain relatively flat, although the short-term momentum does appear to be with the pound as is the case with all GBP pairs owing to the hopes of Brexit deal. Sterling aside, the US dollar is strong and this is reflected in the US Dollar Index performance of late.

With cable back above 1.30 and testing 1.31, the updates this week and next week from the EU regarding Brexit could push the pound in either direction, so do register your interest with us if you wish to be updated.

US Political Update

After Trump's nominee for the Supreme Court, Brett Kavanaugh was confirmed over the weekend I think the next major political event in the US will be the November 6^th congressional elections.

The Democrat Party will be keen to gain the two Senate seats needed to take a majority in the upper chamber of Congress, as this will allow them to more effectively counter Trump's political agenda. Trump’s policies have boosted the US economy resulting in an aggressive monetary policy from the Fed Reserve, and have helped US unemployment fall to its lowest level since December of 1969. For this reason I’m expecting to see the Greenback come under pressure if the current status quo comes into question.

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News

18th January 2021

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